ECON 308 Product Pricing with Monopoly Power Chapter 7 October 1st 6th 2009 Price Discrimination Charging different prices for different units sold Allows firms to increase sales and capture more of consumer surplus Monopoly Pricing Single Price Price Demand Pm Potential Efficiency loss Marginal Cost MR Qm Qty T First Degree Charging different customers different prices Auction College scholarships First Degree Degree Different Prices for different buyers Price Demand Scholarship Amount Tuition Marginal Cost MR Qm Qty T First Degree Charging different customers different prices Auction College scholarships IBM Punch Cards Polariod Camera Film Ink Jet Printers Cartridges Swiffer pads Glllette Razor Blades Second Degree Quantity Forcing Offering a schedule of prices to all buyers which successively lowers the price for additional units purchased Moving down each buyers individual demand Tires Buy 3 get 4th free Soft Drinks Product prices medium16 oz 1 09 07 oz large 22 oz 1 19 extra 6 oz 02 oz extra large 32 oz 1 29 extra 10 oz 01 oz Two Part Tariff Entry Fee plus per unit Costco Membership Price Third Degree Charging different prices to different groups according to different elasticity of Demand Grocery coupons Prescription drugs in different countries Doctors medical services Newly released unique products Movies Children Seniors Middle Matinee Mail Order Catalogues Old vs New Customer Freeway Adjacent Restaurant Brand name mixers on Holiday Sale Mattresses Match any advertised price Menu Necessary Conditions for Successful Price Discrimination Ability to identify and separate buyers by elasticity of demand Collect different prices from the different buyers Prevent Resale
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